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1 www.codevasf.gov.br Investment Opportunity in Biodiesel in the Valley of the São Francisco River INTEGRATED SUSTAINABLE BUSINESS PROJECT.

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Presentation on theme: "1 www.codevasf.gov.br Investment Opportunity in Biodiesel in the Valley of the São Francisco River INTEGRATED SUSTAINABLE BUSINESS PROJECT."— Presentation transcript:

1 1 www.codevasf.gov.br Investment Opportunity in Biodiesel in the Valley of the São Francisco River INTEGRATED SUSTAINABLE BUSINESS PROJECT

2 2 www.codevasf.gov.br Project Team PRESIDENT OF THE REPUBLIC MINISTER OF NATIONAL INTEGRATION Luiz Inácio Lula da Silva Geddel Vieira Lima CODEVASF DIRECTORY President: Orlando Cezar da Costa Castro Cabinet Chief: Manoel Geraldo Dayrell Director of the area of Integrated Development and Infra-Structure: Clementino Souza Coelho Executive Secretary: José Eduardo Borella Director of the area of Irrigation Companies Management: Raimundo Deusdará Filho Executive Secretary: Frederico Calazans Machado Director of the Area of Hydrografic Basins Revitalization: Jonas Paulo de Oliveira Neres Executive Secretary: Silas Macedo Executive Manager of Strategic Administration: Alexandre Isaac Freire Executive Secretary of Administrative Management and Logistic Support: João Honório Carvalho Ramos

3 3 www.codevasf.gov.br Agenda Introduction Business Model Profitability Analysis Irrigation Projects (CODEVASF)

4 4 www.codevasf.gov.br INTRODUCTION Project Description The project is a governmental initiative, aiming to attract investments to the Valley of the São Francisco River (web page: http://www.fundace.org.br/pins). PENSA Agribusiness Intelligence Center. PENSA researchers are responsible for the business models proposition, economic and marketing analysis and for the interaction with potential investors tailoring the analysis to their particular needs (web page: http://www.pensa.org.br). CODEVASF Development agency associated to the Brazilian Ministry of Integration, which the mission is to develop economically and socially the Valley of the São Francisco and Parnaíba Rivers (web page : http://www.codevasf.gov.br).

5 5 www.codevasf.gov.br Scenario Considering the B5 scenario, the impact for the arable land n Brazil will be even more relevant depending on the chosen crop, and the production technology. It will create an additional demand of 13.7 million ha for soy, sunflower, cotton, castor and palm trees. CropCurrent area (ha) Increase(ha)Percentage (%) Additional Production (ton) Soya18,534,3003,408,88518.391,363,554 Sunflower43,2003,097,9817171.251,548,990 Cotton739,2004,437,500600.311,331,250 Castor tree128,0002,454,7871917.8098,315 Palm Tree45,000307,667683.70769,167 Total13,706,820 Source: PENSA, based on CONAB, IBGE, FAESP. Obs.: Considered yields : Soya – 0,4 ton/ha; Sunflower – 0,5 ton/ha; Cotton – 0,3 ton/ha; Castor 0,4 ton/ha; Palm– 2,5 ton/ha; This area may be entirely found at the Brazilian northeastern

6 6 www.codevasf.gov.br Considered Chains for Biodiesel Production in this Project Palm: Brazil is the third largest producer of palm oil, and Para is the state in Brazil with the largest production volume, however it does show some sanitary constraints; Palm oil will have an important role at the biodiesel production: high yields (an average of 31 ton/ha), high amounts of oil per bunch (22.5%) and long agricultural production cycle (average of 30 years); Jatropha: This oleaginous is being studied at several research centers in Brazil, including EMBRAPA and EPAMIG, with the promise of oil supply for biodiesel; It resists very well dry conditions and it has high yields per bunch per hectare (average of 5 tons), high oil content per fruit (38%) and a long production cycle ( average of 30 years);

7 7 www.codevasf.gov.br Palm – Business Model

8 8 www.codevasf.gov.br EMBRAPA has an extensive work aimed to increase the palm yields in the semi arid climate; Natural high potential for production of high yields seeds for the dry and high luminosity conditions; Fertile land in abundance (concession for 30 years), including the neighboring areas surrounding the irrigation projects; Good financing conditions (Banks: Banco do Nordeste, Banco do Brasil e BNDES); Infra-structure for production disposal (ports and roads) for the internal and external markets; Close to the European and North American markets; Tax incentives for including small holders into the biodiesel chains Perspective of B5 scenario already for 2010. Why investing in Palm production in the Valley of the São Francisco River?

9 9 www.codevasf.gov.br Business Model Vegetal Oil Oil Extractors Service Constracts Shared Machinery and Implements Anchor Company Food and Chemistry Industry

10 10 www.codevasf.gov.br Small Holder Vertical Integration Anchor Company Oil Extraction and Biodiesel Production Food Industry Chemical industry Sales in Bunches Production : Refined Palm Oil Palmist Oil Cake Biodiesel for Free Fatty Acid Commercialization Oil Industry Business Model For the agricultural area, the participation will be 30% will be vertically integrated by the anchor company and the other 70% will be occupied by small holders vertically coordinated and contracted with the anchor company.

11 11 www.codevasf.gov.br... Business Model Opportunity Grower A Grower B Grower n Cooperative SPE (Biodiesel Plant + Crushing facility) A+B+C A B Anchor Other C Cooperative = 20% Anchor Company = 51% Others = 29%

12 12 www.codevasf.gov.br Business Model Crushing plant Retailer (Gas Stations) INPUTS Payment for the seed bunches (-) minus service and financial expenses (+) plus share of profit Traders Exports External Growers Financing agent Cooperative producers Payment for the seed bunches Distribution channel

13 13 www.codevasf.gov.br Players Role Definition External ProducersSmall holders cooperativesAnchor company - External growers may sell to the anchor company; -Establish sales contracts; -Anchor company may participate at harvesting. - It consolidates the area of small holders; - It receives for the fruits and pays for the services related to agricultural operations; - Assist the grower with technical assistance; - It manages the input purchases; -It manages the irrigation systems; -It follows the agricultural plan of the anchor company. - It coordinates all agricultural activities; -It receives the right of use regarding the land (CDRU); - It will share the land for the small holders and will select the growers; - It will provide guidance for the cooperative technicians considering ag technical assistance.

14 14 www.codevasf.gov.br Ag ProductionProcessing PINS – BIODIESEL Palm oil Refinment Assumptions & Summary Machinery and Implements Investment Graphs Biodiesel Plan 1 Hectare "n" Hectar(s) Other Cultures Simulations "n" Ag Cost 100% Own Capital Scenario PALMPALM Logistics and Production 100% Own Capital 50% Own Capital 50% Bank Loan Tax Participation in the Project (%) Assumptions Sensitivity analysis

15 15 www.codevasf.gov.br Agricultural Production Source: PENSA. 0% 10% 20% 30% 40% 50% 60% Participation (%) Vertical Integration Cooperative Area Others

16 16 www.codevasf.gov.br Assumptions Data based on EMBRAPA Palm Considerations US$ 1.00 ==>R$ 1.85 Area ("n" há(s)) ==>5,000.00 In Between Crops Crops ======> Area ("n" há(s)) ==>4,500.00 Correction factor for the production area10% Banana Pineapple Manioc MAIN REVENUE SOURCE ==>3 3POTENTIAL REVENUE 1Palm oil; Palmiste; Cake 2Biodiesel (50%); Palm (50%); Palmiste; Cake 3Biodiesel (100%), Palmiste and Cake 4Palma; Palmiste; Cake; Biodiesel available revenue options IMPORTANT Revenue is obtained from the sales of biodiesel and the cake. Minimum Level of Return on Capital ==> 15%

17 17 www.codevasf.gov.br Assumptions Historical prices 1.10 1.20 Historical Prices US$/TONReviewed Historical Prices (US$) Reviewed Price (R$) FFB9377.5172.05R$/ton CPO 540.00450.00999.0022.50% PK 225.00187.50416.25R$/ton PKO 900.00750.001,665.00R$/ton Cake 63.0052.50116.55R$/ton F Proce 1.20 Biodiesel1.080.902.01Liter Auction 1 0.95 Auction 2 0.9 Auction 3 0.875 Auction 4 0.87 Auction 5 0.925 AVERAGE EXTRACTION FOR REVENUE CALCULATION CPO22.50%FFB PK5.00%FFB PKO39.00%PK Cake54.00%PK Oil for sale (minus Free Fatty Acid)92.50% Free Fatty Acid generated from Gegetal Oil7.50% Biodiesel Desity (KG/L)0.88 Biodiesel production per Free Fatty Acid1.1

18 18 www.codevasf.gov.br PESSOA FÍSICAPESSOA JURÍDICA Real profitAssumed ProfitReal Profict PINS0.00%0.65% COFINS0.00%3.00% FUNRURAL2.30%2.85% IMPOSTO DE RENDA ==> According to revenue CSLL0.00%1.08%9.00% CPMF0.38% “Pessoa Física” – REAL PROFIT “Pessoa Jurídica” – ASSUMED PROFIT “Pessoa Jurídica” – REAL PROFIT OPTIONS PARAMETERS TAX SYSTEM SELECTION

19 19 www.codevasf.gov.br Pessoa Jurídica – “Assumed Profit” There is the right to use the Social Stamp Plant area ==>SIM Share of Profit & Losses Agricultural Vertically integrated area 50% Cooperative Area 50% Other 0% Total ==> 100% 1 Processing Anchor Investor100% Growers0% Outhers0% Total ==>100% 0 SOCIAL SEAL TRIBUTOS 1 0 agriculturalprocessing PIS 0.65% COFINS 3.00% ASSUMPTIONS

20 20 www.codevasf.gov.br Assumptions IRRIGAÇÃO UNITY R$US$ Irrigation Investment R$/ha 5,000 2,702.70 Drains 1,000 540.54 Aditional Investments for renewing Pipes 15 YEARS50,0% 2,500.00 4,625.00 OPERATIONAL COST - WATER1 ha # DAYS 150.00 # HOURS PER DAY (h) 12 Water price K1 R$ / ha / mês R$ 8.0096.0051.89 K2 a R$/ ha/mês R$ 26.0312.00168.65 K2b R$ / m3 R$ 0.05 Evaporationmm / day8.00 Evaporationmm / year1,200 Precipitationmm / year350 Evaporation balancemm / year850 Water need yearlym3 / year 8,500 Water consumption Yearlym3 / year 12,000 Efficience95% 11,400425.00229.73 Water expenses total833.00450.27 Operational Cost 1 ha 0,5 CVKwa/h0.3675 ConsumptionKwa/year661.5 Energy costR$/Kwa0.10645 Energy costR$/há/year 70.42 R$ 38.06 Total energy expenditures R$ 70.4238.06 Equipament maintainance5.00% 250 R$ 135.14 Operational Irrigation Cost (R$/ha) 1,153.42 623.47

21 21 www.codevasf.gov.br Yield Average Yield without Irrigation (t FFB/ha)21.00 Factor for increasing the yields with Irrigation 1.50 Expected Average Yileds with Irrigation (t FFB/ha)31.50 PREMISSAS BASIC PLANNED YIELDS YearWITHOUT IRRIGWITH IRRIG FFB/tn 100 200 n+0300 n+1400 n+2500 n+3669 n+471218 n+581522.5 n+691827 n+7102131.5 n+8112131.5 n+9122131.5 n+10132131.5 n+11142131.5 n+12152131.5 n+23262131.5 n+24272131.5 n+25282131.5 n+26292030 n+27301928.5 n+28311827 n+29321725.5 AVERAGE => 16.3824.56

22 22 www.codevasf.gov.br Processing Plant Ownership Source: PENSA 0% 20% 40% 60% 80% 100% 120% Participation (%) Processing Plant Anchor Company Growers Other

23 23 www.codevasf.gov.br Processing Costs R$/Ton FFB US$/Ton FFB Variable Costs Chemic: SteamTon/ ton FFB0.27R$/ton4211.346.13 Electrical EnergyKwh/ ton FFB50R$/Kwh0.094.52.43 Wood for drying Water Ton/ton FFB 0.063R$/ton0,090.0060.00 Services Maintenance costsR$/ton FFB0.05 0.03 Other costsR$/ton FFB0.60.50.93 TOTAL (R$/ton FFB)16.48.86 Fixed Costs Labor R$/ton FFB 2.651.43 Total fixed (R$/ton FFB)2.651.43 Total 19.0510.30 Processing Assumptions Source: GreenTec - UFRJ

24 24 www.codevasf.gov.br Variabel Cost of the Processing Plant (transesterification and esterification). Cost per Unit R$/TON BD Variable Cost 316.14 Gross Material: Third parties oilkg/Ton BD-R$/kg-- Methanolkg/Ton BD96R$/kg1174.00 112.7 Chamical Inputs : CH 3 ONA kg/Ton BD 20R$/Ton4,657.0093.14 H 2 SO 4 kg/Ton BD 1R$/Ton430.000.43 Caustic kg/Ton BD 1R$/Ton730.000.73 Citric Acid kg/Ton BD 0.07R$/Ton2,000.000.14 HCl kg/Ton BD 12R$/Ton660.007.92 Process Water kg/Ton BD 10R$/Ton0.010.0001 Industrial Water kg/Ton BD 1.4R$/Ton0.010.000014 Cooling Water m 3 /Ton BD 0.8R$/Ton0.010.000008 Electricity kW/Ton BD 25R$/Kwh0.092.25 Steam kg/Ton BD 310R$/Ton5015.5 Air of instrument Nm 3 h/Ton BD 6R$/Nm3h0.0010.006 Nitrogenous m³/ ton BD 2R$/ m³0.881.76 Other costs (Services) General expenses ( Including insurance) R$/Ton BD50 Maintenance costs R$/Ton BD31.56 FIXED COST LABOR R$/Ton BD 25 Total Cost (R$/ton BD) 340.71 Total cost (R$/ton BD AGL) 239.94 Total Cost (R$/liter BD) 0.30 Total Cost (R$/liter BD FFA) 0.21 Source: GreenTec - UFRJ Processing Assumptions

25 25 www.codevasf.gov.br Investments – Processing Plant 1 Vegetal Oil Extractor (25 ton/FFB/h): R$ 31,336,738.62; 1 Biodiesel Plant (Vegetable Oils => Biodiesel): R$ 47,334,000.00; Individual production capacity : 30,000 ton/year; 1 Biodiesel Plant (AGL => Biodiesel): R$ 4,733,400.00; Individual production capacity : 3,000 tpa; Life Spam : 30 years; Residual Coefficient of Processing unities: 10%; Exchange Rate (R$/US$) considered : R$1.85;

26 26 www.codevasf.gov.br Assumptions for Transportation Costs DestineDISTANCE (In Km)FREIGHT iR$/Ton Salvador51147 Fortaleza87864 Recife72165 Rio de Janeiro1,928160 São Paulo2,241186 ' PRODUCT Source of Revenue3 1 Palm; Palmiste; Cake 2 Biodiesel; Palm (50%); Palmiste; Cake 3 Biodiesel; (100%) Cake 4 Palm; Palmiste; Cake; Biodiesel (AGL)

27 27 www.codevasf.gov.br Synthesis Agriculture Processing ProductUnity VolumePrice Gross Revenue Biodiesel (100%)Litros30,561,300.00R$ 2.01R$ 80,816,829.55 Palmist oilTon 3,071.25 R$ 1,665.00R$ 5,113,631.25 CakeTon 4,252.50 R$ 116.55R$ 111,516.50 ProductUnity VolumePriceGross Revenue Palm Bunches (FFB)Ton157,500R$ 172.05R$ 27,097,875.00 Biodiesel (100%), Palmist e Cake Producing Area ("n" há(s)) ==>5,000.00

28 28 www.codevasf.gov.br Bunch production (FFB) and Oil Equivalent (in Tons) Source: PENSA 0 50.000 100.000 150.000 200.000 250.000 ANO 1 3 5 7 9 11 ANO 13 ANO 15 ANO 17 ANO 19 ANO 21 ANO 23 ANO 25 ANO 27 ANO 29 Oil Production vs Bunch Production in tons BunchesPalm Oil Years

29 29 www.codevasf.gov.br Agricultural Cost (Stabilized – 7º. Year on) Source: PENSA R$ 0.00 R$ 500.00 R$ 1,000.00 R$ 1,500.00 R$ 2,000.00 R$ 2,500.00 R$ 3,000.00 R$ 3,500.00 R$ 4,000.00 Year 7 Agricultural Cost (R$/ha) Expenses after harvest Administrative expenses harvest irrigation Inputs and materials Crop Treats

30 30 www.codevasf.gov.br Agricultural Results Source: PENSA In between crop revenue Years

31 31 www.codevasf.gov.br Agricultural investments Source: PENSA R$ 0.00 R$ 5,000,000.00 R$ 10,000,000.00 R$ 15,000,000.00 R$ 20,000,000.00 R$ 25,000,000.00 R$ 30,000,000.00 R$ 35,000,000.00 Year-2 -1Year 0Year 1Year 2Year 3Year 4Year 5Year 6 Agricultural Investments Machinery and ImplementsCrop implementationIrrigation

32 32 www.codevasf.gov.br Oil, Biodiesel and By Products Production in Tons Source: PENSA 30,000.00 35,000.00 40,000.00 Ano 1Ano 2Ano 3Ano 4Ano 5Ano 6Ano 7Ano 8Ano 9 Ano 10Ano 11Ano 12Ano 13Ano 14Ano 15Ano 16Ano 17Ano 18Ano 19Ano 20Ano 21Ano 22Ano 23Ano 24Ano 25Ano 26Ano 27Ano 28Ano 29Ano 30 Oil, Biodiesel and By Products Production in Tons Palm OilPalmist OilBiodieselBiodiesel FFACake

33 33 www.codevasf.gov.br R$ 0.00 R$ 20,000,000.00 R$ 40,000,000.00 R$ 60,000,000.00 R$ 80,000,000.00 R$ 100,000,000.00 Processing Revenue and Costs Biodiesel (100%), Palmist and CakeRaw Material Extraction Oil Cost Biodiesel Processing cost Processing Results Source: PENSA Years 1- 30

34 34 www.codevasf.gov.br Processing Investment Source: PENSA R$ 0.00 R$ 5,000,000.00 R$ 10,000,000.00 R$ 15,000,000.00 R$ 20,000,000.00 R$ 25,000,000.00 R$ 30,000,000.00 R$ 35,000,000.00 R$ 40,000,000.00 R$ 45,000,000.00 R$ 50,000,000.00 YEAR -2YEAR -1YEAR 0YEAR 1YEAR 2YEAR 3YEAR 4YEAR 5YEAR 6 Processing Investment Oil ExtractionBiodiesel Plant

35 35 www.codevasf.gov.br Incidence of Logistics Costs Source: PENSA 0% 20% 40% 60% 80% 100% Year 0Year 3Year 6Year 9Year 12Year 15Year 18Year 21Year 24Year 27Year 30 Production Cost X Transportation Costs Transportation CostTotal Production Cost

36 36 www.codevasf.gov.br Consolidated Results Source: PENSA R$ 80,000,000.00 R$ 100,000,000.00 ANO 0 2 4 6 8 10 ANO 12 ANO 14 ANO 16 ANO 18 ANO 20 ANO 22 ANO 24 ANO 26 ANO 28 ANO 30 Revenue Analysis X Consolidated Costs Transportation CostsGross Revenue Total Production CostsNet Profit Years

37 37 www.codevasf.gov.br Financial Analysis Source: PENSA PalmAgricultural ActivityProcessingConsolidated Internal Rate of Return (IRR) 6.01%37.08%20.5% Scenario 100% Own Cap NPV: ($22,906.646.47)NPV: $152,776,846.38NPV: $134,489,918.32 Scenario 50% Own Cap NPV: $6,328,356.33NPV: $248,857,463.34NPV: $278,579,378.45 Scenario 100% Loan NPV: $99,608,319.22NPV: $419,911,390.26NPV: $732,290,025.85 Investment R$ 130,121,483.50R$ 76,956,657.05R$ 207,075,140.55 Operational R$ 446,81,564.59R$ 436,730,390.72R$ 903,541,955.31

38 38 www.codevasf.gov.br Production Cost Comparative Analysis at the Formation Phase Source: PENSA 473 154 530 909 300 500 675 500 250 307 363 475575 277 388 469 631 265 250 235 332 441 1.153 50 108 460 307 308 38 R$ 0.00 R$ 500.00 R$ 1,000.00 R$ 1,500.00 R$ 2,000.00 R$ 2,500.00 R$ 3,000.00 Year -2Year -1Year 0Year +1Year +2Year +3Year -2Year-1Year 0Year +1Year +2Year +3 SEEDLING TREESSOIL PREPARATION PLANTINGCROP TREATS AG INPUTSIRRIGATION Pará Vale S. Francisco

39 39 www.codevasf.gov.br Production Cost Comparative Analysis (From 7 th year on) Pará Vale do São Francisco Source: PENSA 473.60 855.00 505.05 544.35 893.55 480.00 1,153.42 R$ - R$ 500 R$ 1,000 R$ 1,500 R$ 2,000 R$ 2,500 R$ 3,000 R$ 3,500 Irrigation Harvest Ag Inputs Crop treats Pará Vale S. Francisco

40 40 www.codevasf.gov.br Natural Conditions Source: EMBRAPA and PENSA CharacteristicIdealValley of the São Francisco River Temperature25 to 27 o C26.3 o C Precipitation1800 – 2000 mm (Year)400 - 1000 mm (Year) Luminosity5 (daily light hours)7 (daily light hours) Altitude400 m370 m Soil Depth>90 cm90 cm Soil TextureClaySandy Humidity80%65 to 70%

41 41 www.codevasf.gov.br Tax generation: –Total: R$ 23,484,242.00; –Agricultural Production: R$ 5,624,659.00; –Processing plant: R$ 17,859,583.00; Job Generation: 6 workers/ha (CERU/EMBRAPA CPAA); Agriculture: 9.000 jobs for an area of 1,500 hectares (Anchor Company); For Oil Extraction : 25 direct jobs and 8 indirect jobs (Algoden); For the Biodiesel Plant : 30 direct jobs and 10 indirect jobs (Dedini); Benefits for the Social and Economic Development

42 42 www.codevasf.gov.br Additional revenues for the Ag input Forms : R$ 2,721,750.00; Additional revenues for transportation firms : R$ 2,161,900.13¹; Diversification of economic activities; –Produced together with pineapple, banana and manioc; ¹ Using Port of Aratu (Salvador, BA). Benefits for the Social and Economical Development

43 43 www.codevasf.gov.br Sensitivity Analysis Yield (ton fruto/ha) Vegetable Oil Price TIR Yields (ton fruto/ha) Exchange Rate (R$/ US$) IRR 100% own Capital => Biodiesel Price (R$/ton) IRR 100% own Capital =>

44 44 www.codevasf.gov.br Jatropha

45 45 www.codevasf.gov.br Why Investing in Jatropha in the Valley of the São Francisco River ? EPAMIG has an extensive work aimed to increase the palm yields in the semi arid climate; Natural high potential for production of high yields seeds for the dry and high luminosity conditions; Fertile land in abundance (concession for 30 years), including the neighboring areas surrounding the irrigation projects; Good financing conditions (Banks: Banco do Nordeste, Banco do Brasil e BNDES); Infra structure for production disposal (ports and roads) for the internal and external markets; Close to the European and North American markets; Tax incentives for including small holders into the biodiesel chains; Perspective of B5 scenario for 2010.

46 46 www.codevasf.gov.br Business Model Vegetal Oil Oil Extractors Service Constracts Shared Machinery and Implements Anchor Company Fod and Chemistry Industry

47 47 www.codevasf.gov.br Small Holder Vertical Integration Anchor Company Oil Extraction and Biodiesel Production Food Industry Chemical industry Sales in Bunches (jatropha) Production : Vegetable Oil Biodiesel Commercialization Oil Industry Business Model For the agricultural area, the participation will be 50% will be vertically integrated by the anchor company and the other 50% will be occupied by small holders vertically coordinated and contracted with the anchor firm.

48 48 www.codevasf.gov.br... Business Model Opportunity Grower A Grower B Grower n Cooperative SPE (Biodiesel Plant + Crushing facility) A+B+C A B Anchor Other C Cooperative = 20% Anchor Company = 51% Others = 29%

49 49 www.codevasf.gov.br Business Model Crushing plant Retailer (Gas Stations) INPUTS Payment for the seed fruits (-) minus service and financial expenses (+) plus share of profit Traders Exports External Growers Financing agent Cooperative producers Payment for fruits Distribution channel

50 50 www.codevasf.gov.br Players’ Role Definition External ProducersSmall holders cooperativesAnchor company - External growers may sell to the anchor company; -Establish sales contracts; -Anchor company may participate at harvesting. - It consolidates the area of small holders; - It receives for the fruits and pays for the services related to agricultural operations; - Assist the grower with technical assistance; - It manages the input purchases; -It manages the irrigation systems; -It follows the agricultural plan of the anchor company. - It coordinates all agricultural activities; -It receives the right if use regarding the land (CDRU); - It will share the land for the small holders and will select the growers; - It will give some guidance for the cooperative technicians considering ag technical assistance.

51 51 www.codevasf.gov.br Ag ProductionProcessing PINS – BIODIESEL Jatropha Refinment Assumptions & Summary Machinary and Implements Investment Graphs Biodiesel Plan 1 Hectare "n" Hectare(s) Other Cultures Simulations "n" Ag Cost 100% Own Capital Scenarium JATROPHAJATROPHA Logistics and Production 100% Own Capital 50% Own Capital 50% Bank Loan Tax Participation in the Project (%) Assumptions Sensitivity analysis

52 52 www.codevasf.gov.br Data from EPAMIG Jatropha US$ 1.00 =>R$ 1.85 Area for Production (há) =>50,000 Yields 5ton/ha Irrigation (Irrigation Factor)1.50 FALSO FINAL YIELD5ton/há OIL CONTENT38%há FRUIT PRICE0.39R$/kg PRICE PER TON R$/ton OIL PRICE1.54R$/kg MEAL PRICE R$/ton BIODIESEL PRICE PER LITER1.84R$/L BIODIESEL DENSITY0.88Kg/L BIODIESEL PRICE PER KILO2.09R$/kg JATROPHA OIL (100%) BIODIESEL PRODUCTION (100%) JATROPHA OIL(50%) AND BIODIESEL PRODUCTION (50%) Revenue options Assumptions

53 53 www.codevasf.gov.br Historical Prices Biodiesel Historical Prices (US$/litro) 11.10 21.20 F Price1.10US$ Biodiesel 0.990.90 Auction 1 0.95 Auction 2 0.9 Auction 3 0.875 Auction 4 0.87 Auction 5 0.925 Estimation price base of Oil (R$/liter)1.40 Estimation price base of Fruit (R$/KG)0.35 Biodiesel Price Base (R$/litro) 1.67 Assumptions

54 54 www.codevasf.gov.br IRRIGATION COST Irrigation – Driping Investments Unities R$US$ InvestmentR$/ha 5,000.0 2,702.7 Drains 1,000.0 540.5 Aditional Investment Pipes Renewal 15 years50,0% 2,500.0 1,351.4 Water1 ha # days 150,00 Daily irrigation time (h) 12 Water price K1R$ / ha / month R$ 8,00 96.0 51.9 K2aR$/ ha / month R$ 26,00 312.0 168.6 K2bR$ / m3 R$ 0,050 Evaporationmm / day8,00 Evaporationmm / year1.200 Rainmm / Year350 Evaporation balancemm / year850 Yearly water needm3 / year 8.500 Water supply capacity yearly - 80m3/dia/hám3 / year12,000 Efficiency of 95% 11,400 425,0229,729,729.7 Total Water expenses 833.0 450.3 Operational enery costs1 ha 0.5 CV Kwa/h 0,37 Energy consumptionKwa/year 661,50 Energy cost R$/kwa R$ 0,106 Electricity cost R$/ha/year 70.4 38.1 Total Energy Cost 70.4 38.1 Equipment Maintainance 5,0% 250.0 135.1 Source: Netafim Tarifa Energia R$1,153.4 US$ 62 3.5 Irrigation Cost Assumptions

55 55 www.codevasf.gov.br YEAR KG/HÁ (non irrigated)TOTAL KG/HÁTOTAL OIL (KG/HÁ) 1250.0025095 21000.001000380 32500.002500950 45000.0050001900 Estabilized Production Plan Assumptions

56 56 www.codevasf.gov.br Agricultural Production 0% 10% 20% 30% 40% 50% 60% Participation (%) Verti. Integrated Cooperative Others

57 57 www.codevasf.gov.br Synthesis (after production stabilization) Biodiesel (100%) Production Area (ha(s)) ==>50,000.00 Agriculture Processing FRUITSFRUITS RevenueR$ Total Gross Sales96,250,000.00 Production Costs43,440,000.00 BIODIESEL 100 % RevenueR$ Gross Total Sales (liter oil) 194,625,550.00 Processing Cost37,129,582.00

58 58 www.codevasf.gov.br Agricultural Cost (after production stabilization) Source: PENSA 0.00 100.00 200.00 300.00 400.00 500.00 600.00 700.00 800.00 900.00 1 Agricultural cost (R$/ha) after the first year Fungicide Insecticide Fertilizer Treats and harvest

59 59 www.codevasf.gov.br Agricultural and Processing Production Source: PENSA 0 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 ANO 0 ANO 2 ANO 4 ANO 6 ANO 8 ANO 10 ANO 12 ANO 14 ANO 16 ANO 18 ANO 20 ANO 22 ANO 24 ANO 26 ANO 28 ANO 30 Oil and Fruit Production (Kg) Oil ProductionFruit Production YEARS

60 60 www.codevasf.gov.br Agricultural Revenue and Costs $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 Fruit Revenue x Agricultural Costs (R$) Agricultural CostsFruit Revenue YEAR

61 61 www.codevasf.gov.br Processing Plant Ownership 0% 20% 40% 60% 80% 100% 120% Participation (%) Processing Plant Anchor Company Cooperative Other

62 62 www.codevasf.gov.br Synthesis (after production stabilization) Oil Extractor Plant (CAPACIty of 150 ton/day) DEPRECIATION FACTOR10% PERIOD30 YEARS Plant Installation Schedule Year# PlantsInvestmentTotal # of PlantsTotal Investment 01 8,879,220.741 11 2 17,758,441.48 22 4 35,516,882.97 31.5 13,318,831.115.5 48,835,714.08 Irrigation Investment (R$) R$ 6,000.00 Rate10% Reinvestment10 YEARS BIODIESEL PLANT- 100,000 ton/year Plant Installation Schedule Year# PlantsInvestmentTotal # of PlantsTotal Investment ano 21R$ 42,257,600.001 Agriculture Processing

63 63 www.codevasf.gov.br Total Investment Source: PENSA $0 $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 $70,000,000 Year 0Year 1Year 2Year 3 Total Investment (R$) Agric Investiment Extraction Investment Biodiesel Investment Crop Implementation Investment

64 64 www.codevasf.gov.br Processing Revenue and Costs Source: PENSA $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 $250,000,000 Total Revenue x Total Processing Cost for Biodiesel (R$) Oil Extraction CostBiodiesel CostBiodiesel RevenueOleaginous Revenue YEAR 1 -30

65 65 www.codevasf.gov.br Source: PENSA Transportation Cost 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Ano 0Ano 2Ano 4Ano 6Ano 8Ano 10Ano 12Ano 14Ano 16Ano 18Ano 20Ano 22Ano 24Ano 26Ano 28Ano 30 Total Costs X Transportation Costs Transp CostTotal Cost YEARS 1 -30

66 66 www.codevasf.gov.br Consolidated Analysis Source: PENSA -R$ 50,000,000.00 R$ 0,00 R$ 50,000,000.00 R$ 100,000,000.00 R$ 150,000,000.00 R$ 200,000,000.00 R$ 250,000,000.00 ANO 0 2 4 6 8 10 ANO 12 ANO 14 ANO 16 ANO 18 ANO 20 ANO 22 ANO 24 ANO 26 ANO 28 ANO 30 Gross Sales X Transportation Costs X Net Profit Trabsp CostsGross SalesTotal CostNet profit YEAR 1 - 30

67 67 www.codevasf.gov.br Financial Analysis Source: PENSA JatrophaAgricultureProcessingConsolidated IRRIRR: 36.62%IRR: 41.31 %IRR: 38.90 % 100% Own CapitalNPV: R$ 233,621,565.47NPV : R$ 270,271,090.26NPV: R$ 502,203,902.80 50% Own CapitalNPV: R$ 464,130,305.30NPV: R$ 406,606,107.32NPV: R$ 829,930,605.91 Cenário 100% LoamNPV : R$ 1,023,530,492.47 NPV: R$ 636,457,440.14NPV: R$ 1,761,838,563.94 Total InvestmentR$ 180,065,000R$ 86,653,704R$ 224,461,104.00 Total CostR$ 1,063,800,000R$ 898,186,514R$ 2,083,412,189

68 68 www.codevasf.gov.br Natural Conditions Source: EMBRAPA and PENSA CharacteristicIdealValley of the São Francisco River Temperature25 a 30 o C26.3 o C Precipitation350 - 850 mm400 - 1000 mm (Year) Luminosity5 (hours of light per day) 6 (hours of light per day) Altitude200 – 400 m370 m Soil Depth> 80m90 cm Soil TextureMedium Humidity>40%65 a 70%

69 69 www.codevasf.gov.br Agricultural Production Cost Comparative Analysis Source: PENSA Valley of the São Francisco River X São Paulo Comparative Agricultural Cost (R$/ha) R$ - R$ 200 R$ 400 R$ 600 R$ 800 R$ 1,000 R$ 1,200 R$ 1,400 R$ 1,600 Ano 1Ano 3Ano 5Ano 7Ano 9 Ano 11Ano 13Ano 15Ano 17Ano 19Ano 21Ano 23Ano 25Ano 27Ano 29 São Paulo Valley of the São Francisco River

70 70 www.codevasf.gov.br Source: PENSA São Paulo Implementation Year – Year 1 Agricultural Production Cost Comparative Analysis

71 71 www.codevasf.gov.br Source: PENSA São Paulo Year 2 – First Production Year 369.05 659.50 397.40 320.00 65.95 50.00 R$ - R$ 200 R$ 400 R$ 600 R$ 800 R$ 1,000 R$ 1,200 Admin Expen. Ag inputs Operations São Paulo São Francisco Agricultural Production Cost Comparative Analysis

72 72 www.codevasf.gov.br Tax Generatation: –Total: R$ 51,299,090.00; –Produção Agrícola: R$ 16,974,775; –Produção Industrial: R$ 34,324,315; Job Generation: 0,8 employees/há (direct),(based on interviews); Agricultural : 20 thousand jobs for na area os 25,000 hectars (Vertically integrated areas); Vegetal Oil Extractor: 25 direct jobs and 8 indirect (Algoden); Biodiesel Plant : 30 direct jobs and 10 inderect (Dedini); Benefits for the Social and Economic Development

73 73 www.codevasf.gov.br Additional Revenues for Agricultural Input Firms: R$ 16,000,000.00; Additional Revenues for Transportation Firms : R$ 4,375,700.00¹; Economic diversification; ¹ using the Port of Aratu (Salvador, Bahia State). Benefits for the Social and Economic Development

74 74 www.codevasf.gov.br Sensitivity Analysis 6.005.755.505.255.004.754.504.254.00 1.74 44.22%42.06%39.88%37.67%35.42%33.13%30.80%28.41%25.98% 1.70 42.88%40.77%38.63%36.45%34.24%31.99%29.69%27.35%24.95% 1.67 41.56%39.49%37.38%35.24%33.07%30.85%28.60%26.29%23.93% 1.64 40.23%38.19%36.13%34.02%31.89%29.71%27.49%25.23%22,91% 1.60 38.92%36.92%34.88%32.82%30.72%28.58%26.40%24.17%21.88% 38.90% 6.005.755.505.255.004.754.504.254.00 1.46 48.15%45.89%43.59%41.26%38.90%36.49%34.05%31.55%29.00% 1.43 48.15%45.89%43.59%41.26%38.90%36.49%34.05%31.55%29.00% 1.40 48.15%45.89%43.59%41.26%38.90%36.49%34.05%31.55%29.00% 1.37 48.15%45.89%43.59%41.26%38.90%36.49%34.05%31.55%29.00% 1.34 48.15%45.89%43.59%41.26%38.90%36.49%34.05%31.55%29.00% 38.90% 6.005.755.505.255.004.754.504.254.00 1.92 50.96%48.61%46.24%43.83%41.38%38.89%36.36%33.78%31.14% 1.89 49.55%47.24%44.91%42.54%40.13%37.69%35.20%32.66%30.06% 1.85 48.15%45.89%43.59%41.26%38.90%36.49%34.05%31.55%29.00% 1.81 46.74%44.52%42.27%39.98%37.66%35.29%32.88%30.43%27.92% 1.78 45.35%43.17%40.96%38.71%36.43%34.10%31.74%29.32%26.85% 38.90% IRR Yields (ton fruit/ha) Biodiesel Price (R$/litro) IRR 100% Own Capital IRR Yields (ton fruit/ha) Exchange Rate (R$/US$) Vegetal Oil (R$/kg) IRR Yields (ton fruit/ha) IRR 100% Own Capital

75 75 www.codevasf.gov.br CODEVASF Director of the area of Integrated Development and Infra-Structure Clementino de Souza Coelho Board Assistant of the area of Integrated Development and Infra-Structure Alvane Ribeiro Soares First Secretary of the area of Integrated Development and Infra-Structure Guilherme Almeida Gonçalves de Oliveira PENSA Coordinator: Prof. Dr. Marcos Fava Neves Executive Manager of the Project: Luciano Thomé e Castro Executive Manager of the Project : Ricardo Messias Rossi Executive Assistant of the Project: Vinicius Mazza da Silva Executive Assistant of the Project : Marina Darahem Mafud Technical Team Responsible Researcher: Marco Antônio Conejero Assistant Researcher: José Carlos de Lima Junior Contributor: César Augusto Mendonça Zambrano e Eduardo José Sia Translation: Central de Traduções

76 76 www.codevasf.gov.br For further Information: E-mail: pins@fundace.org.brpins@fundace.org.br Mail Address: Av. Pres. Vargas, 2001- Conj. 143/144, Jardim América Ribeirão Preto - SP - CEP: 14.020-260 Tel.: +55 (16) 3911 6088 Responsible Team


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